ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR V. M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. , JAIPUR

ITA 640/JPR/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9872 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 10-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Assessee Lawyers: RAJEEV SOGANICA
• Keywords: Capital asset; Depreciation; Revenue expenditure
• Section: 43B; 143(3); 37(1); 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 489/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-2015 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD., GOLCHA GARDENS, AGRA ROAD, JAIPUR-302003. CUKE VS. THE ACIT, CIRCLE-5 JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGCA 2491 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 640/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 THE DCIT, CIRCLE-5, JAIPUR. CUKE VS. M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD., GOLCHA GARDENS, AGRA ROAD, JAIPUR-302003. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGCA 2491 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SOGANI(C.A.) & SHRI ROHAN SOGANI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/09/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/12/2018 VKNS'K@ ORDER ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 2 PER: SHRI VIKRAM SINGH YADAV, A.M. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 21.02.2018 FOR A.Y. 2014-15. THESE APPEALS WERE HEA RD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. THE RESPECTIVE GROUNDS OF THE APPEAL ARE AS UNDER:- ASSEESSS GROUNDS OF APPEAL (ITA NO. 489/JP/2018) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED, IN NOT ALLOWING THE CLAIM OF THE ASSESSEE COMPANY UNDER SECTION 37(1) OF RS. 60,000/- AND, RE STRICTING SUCH CLAIM TO RS. 52,98,858/-, FOR THE REASON THAT SUCH AMOUNT WAS CLAIMED AS A DEDUCTION IN THE RETURN OF INCOME FILE D BY THE ASSESSEE COMPANY FOR THE RELEVANT PREVIOUS YEAR. TH E ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND A GAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY ALLOWING DEDUCTION UNDER SECTION 37(1), OF THE ENTIRE AMOUNT OF RS. 60 ,00,000/-, AS CLAIMED BY THE ASSESSEE COMPANY BEFORE THE LD. AO, IN THE ASSESSMENT PROCEEDINGS AND BEFORE LD. CIT(A), IN TH E FIRST APPELLATE PROCEEDINGS. REVENUES GROUNDS OF APPEAL (ITA NO. 640/JP/2018) (I) (A) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT THE SUM OF RS. 60 LACS BEING PAYMENT TO FARMERS IS IN THE NATURE OF C OMPENSATION AND HENCE ADMISSIBLE DEDUCTION U/S 37(1). (B) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT THE PAY MENT OF RS. 60 LACS PERTAINING TO KHASARA NO. 42/63; 42/64 (TOTAL AREA OF 15 BIGHA) IS IN THE NATURE OF COMPENSATION EVEN WHEN THE AGREEMENT CLEARLY STATES PURCHASE OF LAND. (C) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN OVERLOOKING THAT THE SE LAND I.E. ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 3 KHASARA NO. 42/63; 42/64 ARE DIFFERENT FROM THE LAN DS WHICH ARE STATED IN THE SAMARPAN PATRA SUBMITTED TO THE TEH SILDAR. (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 13,70,733/- MADE FOR DEPOSITING THE EMPLOYEES CONTR IBUTION TO PF & ESI BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN THE RESPECTIVE ACT. (III) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT TH E EMPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVIS IONS OF SECTION 43B AND NOT BY SECTION 36(1)(VA) R.W.S. 2(2 4)(X) OF THE INCOME TAX ACT, 1961. 2. REGARDING GROUND NO. 1 OF THE ASSESSEES APPEAL AND THE GROUND NO. 1 OF THE REVENUES APPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MINING, MANUFACTURIN G AND TRADING OF MINERALS BESIDES IT DERIVES INCOME FROM MINING CONT RACTS. THE ASSESSEE COMPANY HAS MINING AREA ALLOTTED BY THE GOVERNMENT OF RAJASTHAN ON LEASE FOR A PERIOD OF 20 YEARS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE COMPANY PAID COMPENSATION FOR VACATING THE LAND, WITHIN THE LEASED AREA, AMOUNTING TO RS. 60,00,000/-. IN THE BOOKS OF ACCOUNTS, THE SAME WAS SHOWN UNDER THE HEAD MINING RIGHTS F ORMING PART OF THE INTANGIBLE ASSETS AND IN THE RETURN OF INCOME DEPRE CIATION AMOUNTING TO RS. 52,98,858/-, AT THE RATE OF 25% WAS CLAIMED U/S 32 OF THE IT ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE ALTERNATIVELY CLAIMED THE PAYMENT AS REVENUE EXPEND ITURE U/S 37(1) OF THE ACT. THE AO AT PARA 5.3 OF THE ASSESSMENT ORDER U/S 143(3) STATED THAT THE FACTS OF THE CASE ARE CLEARLY IDENTICAL WI TH PRECEDING YEAR I.E. A.Y 2013-14 AND FOLLOWING THE SAME, HE DISALLOWED T HE DEPRECIATION CLAIMED OF RS. 52,98,858/- MADE BY THE ASSESSEE. ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 4 3. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2013-14 (ITA NO. 572/JP/2017 ORDER DATED 01.09.2017) ALLOWED THE CLAIM OF THE ASSESSEE U/S 37(1) HOWEVER THE QUANTUM OF CLAIM WAS RESTRICTED TO RS. 52,98,858/- AND HER RELEVANT FINDINGS ARE AS UNDER:- HOWEVER, IT IS SEEN THAT IN THE RETURN FILED FOR T HE RELEVANT YEAR A DEDUCTION OF RS. 52,98,858/- HAD BEEN CLAIMED AGAIN ST THE DEPRECIATION OF INTANGIBLE ASSETS, IN VIEW OF THE S AME THE DEDUCTION TO BE ALLOWED IS TO BE RESTRICTED TO THIS AMOUNT AS AGAINST RS. 60 LAKHS CLAIMED IN THE ALTERNATE CLAIM UNDER SECTION 37(1). RELIANCE IS PLACED ON THE DECISIONS OF ITAT JAIPUR IN THE CASE OF ACIT VS. SUBH LAKSHMI CONSTRUCTION COMPANY 2003, 1SOT 587 (JP) AND ITAT JODHPUR BENCH IN ITO VS. NEW MITHERWAL CONSTRUCTION CO. 120 TAXMAN 83 (JODHPUR) FOR THIS P ROPOSITION. IN VIEW OF THE ABOVE, GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT UNDER IDENTICAL SET OF FACTS, FOR IMMEDIATELY PRECEDING A SSESSING YEAR 2013-14, WHEREIN THE ASSESSEE HAD PAID COMPENSATION OF RS. 3 5,00,000/- THE CLAIM OF THE ASSESSEE WAS ALLOWED U/S 37(1) OF THE ACT. IT WAS ACCORDINGLY SUBMITTED THAT LD. CIT(A) HAS RIGHTLY F OLLOWED THE DECISION OF THE COORDINATE BENCH AND ALLOWED THE DEDUCTION U /S 37(1) OF THE ACT. 5. AT THE SAME TIME, IT WAS SUBMITTED THAT THE FIND ING OF THE LD. CIT(A) THAT THE CLAIM OF THE ASSESSEE COMPANY U/S 3 7(1) OF THE ACT CANNOT BE GREATER THAN THE AMOUNT ORIGINALLY CLAIM IN THE RETURN IS NOT ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 5 CORRECT AND LD. CIT(A) HAS MISPLACED HER RELIANCE O N THE DECISION IN CASE OF ACIT VS. SUBH LAXMI CONSTRUCTION CO. (2003) 1 SOT 587 AND ITO VS. NEW MITHERWAL CONSTRUCTION CO. (2002) 120 T AXMAN 82 AS THE FACTS IN THOSE TWO CASES ARE TOTAL DIFFERENT FROM T HE PRESENT CASE. IN BOTH THESE CASES, ENTIRE MECHANISM OF DETERMINING T HE ASSESSED INCOME HAD UNDERGONE CHANGE DURING APPELLATE PROCEE DINGS, WHEREIN PERCENTAGE OF NP TO BE APPLIED, IN THE CASE OF THE ASSESSEE, SUBJECT TO CERTAIN DEDUCTION, WAS DETERMINED. HOWEVER, AFTER A PPLICATION OF SUCH PERCENTAGE DETERMINED, ASSESSED INCOME, UNKNOWINGLY , HAD BECOME LOWER THAN THE RETURNED INCOME WHEREAS, THE APPELLA TE AUTHORITIES HAD NEVER INTENDED TO GIVE RELIEF TO THE ASSESSEES, IN SUCH A MANNER, THAT THEIR ASSESSED INCOME COULD GO BELOW THE RETURNED I NCOME. NEITHER, ANY SUCH CLAIM, AT ANY POINT OF TIME, WAS MADE BY THE ASSESSEE, BEFORE THE AO OR THE APPELLATE AUTHORITIES. HOWEVER, IN THE PR ESENT CASE, A FRESH CLAIM, WAS MADE BY THE ASSESSEE COMPANY, ALLOWABLE UNDER SECTION 37(1), BEFORE BOTH THE LOWER AUTHORITIES, WHICH WAS EVEN ACCEPTED BY THE LD. CIT(A). 5.1 IT WAS FURTHER SUBMITTED THAT IN THE CASE OF NE W MITHERWAL CONSTRUCTION CO. (SUPRA), THE ITAT JODHPUR BENCH ADJUDICATED THE ISSUE UNDER MISCELLANEOUS APPLICATION FILED U/S 254(2) BY THE DEPARTMENT. IN THIS CASE, NET PROFIT % WAS ESTIMATED BY THE ITAT W HICH RESULTED INTO THE ASSESSED INCOME BEING LOWER THAN THE RETURNED I NCOME WHICH WAS SUBSEQUENTLY RECTIFIED BY ITAT. IT IS A TRITE LAW T HAT THE POWERS OF THE ITAT ARE DIFFERENT FROM THE POWERS, AS ASSIGNED UND ER THE STATUTE, TO THE AO, AND CIT(A). THE ITAT HAS TO PASS ORDERS TH EREON AS IT THINKS FIT. THUS, THE ITAT, CANNOT GO BEYOND THE GROUNDS O F THE APPEAL FILED ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 6 BEFORE IT BY AGGRIEVED PARTY AND ITS POWERS ARE RES TRICTED TO GRANTING RELIEF TO THE EXTENT AS HAS BEEN CLAIMED BY THE ASS ESSEE. 5.2 IT WAS FURTHER SUBMITTED THAT THIS PROPOSITION CAN BE EXPLAINED WITH THE HELP OF AN ILLUSTRATION. SUPPOSE MR X AN A SSESSEE FILED HIS RETURN OF INCOME WITH RS. 10,00,000, THEREAFTER ADD ITION WAS MADE BY THE AO OF RS. 5,00,000. AGAINST SUCH ADDITION, APPE AL WAS PREFERRED BEFORE CIT(A) APPEALS WHO GRANTED RELIEF OF RS. 3,0 0,000 AND CONFIRMED ADDITION OF RS. 2,00,000. THEREAFTER, ASSESSEE PREF ERRED SECOND APPEAL, BEFORE ITAT AGAINST THE ADDITIONS CONFIRMED OF RS. 2,00,000 BY THE CIT(A). IN SUCH A CASE ITAT CANNOT GRANT RELIEF TO THE ASSESSEE MORE THAN RS. 2,00,000. ON THE OTHER HAND, IF DEPARTMEN T PREFERS APPEAL FOR THE RS. 3,00,000 RELIEF GRANTED BY CIT(A), THEN ITA T APROPOS SUCH APPEAL CANNOT CONFIRM THE ADDITION OF MORE THAN RS. 3,00,000. HOWEVER, AO, BEING A QUASI JUDICIAL AUTHORITY , AND CIT(A), HAVING POWERS CO-TERMINUS AS THAT OF THE AO, HAVE WIDE POW ERS UNDER THE LAW AND CAN EVEN ENTERTAIN NEW CLAIMS MADE BEFORE THEM, DURING THE PROCEEDINGS, EVEN TO THE EXTENT THAT THE ASSESSED I NCOME MAY GO LOWER THAN THE RETURNED INCOME. BOTH AO AND CIT(A) ARE EN TRUSTED WITH THE RESPONSIBILITY OF ASSESSING INCOME/PASSING ORDERS I N ACCORDANCE WITH THE LAW AND NOT TO TAKE ANY BENEFIT OF ANY MISTAKE COMM ITTED BY THE ASSESSEE. IN THE AFOREMENTIONED JUDGMENTS, RELIED B Y LD. CIT(A), NO CLAIMS WERE MADE BY THE ASSESSEES BEFORE THE LOWER AUTHORITIES. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE CONSISTE NTLY MADE THE CLAIM BEFORE THE AO AND CIT(A) FOR ALLOWABILITY OF ENTIRE AMOUNT OF RS. 60,00,000 UNDER SECTION 37(1) OF THE ACT. ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 7 5.3 IT WAS FURTHER SUBMITTED THAT IT IS A SETTLED L AW THAT FRESH CLAIM CAN BE MADE FOR THE FIRST TIME BEFORE THE CIT(A). T HE LD. CIT(A) HERSELF HAS ACCEPTED THE SAID LEGAL PROPOSITION. HOWEVER, H AVING ACCEPTED THE SAID LEGAL PROPOSITION, LD. CIT(A) GRAVELY ERRED IN COMING TO A CONCLUSION THAT FRESH CLAIM SHOULD NOT LEAD TO ASSESSED INCOME BELOW RETURNED INCOME. SUCH A PROPOSITION WOULD FRUSTRATE THE ESTA BLISHED LEGAL PRINCIPLE THAT FRESH CLAIM CAN BE MADE BEFORE THE C IT(A) EVEN IF THE SAME IS NOT CLAIMED IN THE RETURN OF INCOME. RELIAN CE IS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF JU TE CORPORATION OF INDIA [1991] 187 ITR 688 [SC], WHEREIN THE CLAIM OF THE ASSESSEE OF ADDITIONAL DEDUCTION IN RESPECT OF ITS LIABILITY OF PURCHASE TAX MADE DURING THE HEARING OF APPEAL WAS HELD TO BE LAWFUL AND ADMISSIBLE. 5.4 FURTHER, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED [1998] 229 ITR 383 (SC). IN THIS CASE, ASSESSEE HAD DEPOSITED ITS FUNDS NOT IMMEDIATELY REQUIRED BY IT ON SHORT TERM DEPOSI TS WITH BANKS. THE INTEREST RECEIVED ON SUCH DEPOSIT WAS OFFERED BY TH E ASSESSEE COMPANY ITSELF FOR TAX AND THE ASSESSMENT WAS COMPLETED ON THAT BASIS. THIS, INCLUSION OF THE INTEREST INCOME WAS NOT CHALLENGED BY THE CIT(A), HOWEVER, BEFORE THE ITAT THE COMPANY CONTENDED THAT SUCH INTEREST INCOME WAS NOT INCLUDIBLE IN THE TOTAL INCOME. THE HONBLE SUPREME COURT HELD SUCH A CLAIM MADE FOR THE FIRST TIME BEF ORE ITAT ALLOWABLE. 5.5 NEEDLESS TO MENTION THAT IN BOTH THE ABOVE SITU ATIONS, THE DECISIONS OF THE HONBLE SUPREME COURT RESULTED INT O THE ASSESSED INCOME BEING LOWER THAN THE RETURNED INCOME. RELIAN CE IS ALSO PLACED ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 8 ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS [2012] 252 CTR 151 ( BOMBAY) WHEREIN IT WAS HELD THAT AN ASSESSEE IS ENTITLED TO RAISE B EFORE APPELLATE AUTHORITIES ADDITIONAL GROUNDS IN TERMS OF ADDITION AL CLAIMS NOT MADE IN RETURN FILED BY IT. 5.6 IT WAS FURTHER SUBMITTED THAT THE CBDT VIDE CIRCULAR NO. 549 DATED 31.10.1989 ISSUED INSTRUCTIONS REGARDING THE PROCEDURE FOR THE ASSESSMENT AND FORMULATED A NEW SCHEME OF SCRUTINY ASSESSMENT AND LAID AS UNDER: 5.12 SINCE UNDER THE PROVISIONS OF SUB-SECTION (1) OF THE NEW SECTION 143, AS ASSESSMENT IS NOT TO BE MADE NOW, T HE PROVISIONS OF SUB-SECTIONS (2) AND (3) HAVE ALSO BE EN RECAST AND ARE ENTIRELY DIFFERENT FROM THE OLD PROVISIONS. A N OTICE UNDER SUB- SECTION (2), WHICH WILL BE ISSUED ONLY IN CASES PIC KED UP FOR SCRUTINY, IS NOW ISSUED ONLY TO ENSURE THAT THE ASS ESSEE HAS NOT UNDERSTATED HIS INCOME OR HAS NOT COMPUTED EXCESSIV E LOSS OR HAS NOT UNDERPAID THE TAX IN ANY MANNER WHILE FURNI SHING HIS RETURN OF INCOME. THIS MEANS THAT UNDER THE NEW PRO VISIONS, IN AN ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IN A SCRUTINY CASE, NEITHER THE INCOME CAN BE ASSESSED AT A FIGUR E LOWER THAN THE RETURNED INCOME, NOR LOSS CAN BE ASSESSED AT A FIGURE HIGHER THAN THE RETURNED LOSS, NOR A FURTHER REFUND CAN BE GIVEN EXCEPT WHAT WAS DUE ON THE BASIS OF THE RETURNED INCOME, A ND WHICH WOULD HAVE ALREADY BEEN ALLOWED UNDER THE PROVISION S OF SECTION 143(1)(A)(II). ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 9 5.7 IT WAS SUBMITTED THAT THE AFORESAID CBDT CIRCUL AR CREATED A CONFUSION AMONGST THE ASSESSING OFFICER AND THEY WE RE OF THE VIEW THAT THE ASSESSING OFFICERS CANNOT ASSESS THE INCOME LES SER THAN RETURNED INCOME AND CANNOT ASSESS LOSS HIGHER THAN RETURNED LOSS WHILE CARRYING OUT REGULAR ASSESSMENTS UNDER SECTION 143(3). THIS MATTER CAME UP HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF BA KELITE HYLAM LTD. [1999] 107 TAXMAN 429 (AP) WHEREIN HONBLE HIGH COU RT CONSIDERED THE PROVISIONS OF SECTION 143 AND THE SAID CBDT CIR CULAR AND HELD THAT AO HAS POWER TO GRANT REFUND TO THE ASSESSEE IN ASS ESSMENT PROCEEDINGS. FOR EXAMPLE, IF ASSESSEE CLAIMS DEPREC IATION AT A RATE LOWER THAN THE RATE PRESCRIBED IN THE INCOME TAX RU LES, THEN IN SUCH CASE AT THE TIME OF ASSESSMENT AO WILL APPLY THE CO RRECT RATE AS PRESCRIBED IN THE RULES. THIS WILL RESULT IN A SITU ATION WHERE ASSESSED INCOME WOULD BE LOWER THAN RETURNED INCOME. THEREFO RE, EVEN IF RETURNED INCOME IS HIGHER, ASSESSING OFFICER IN REG ULAR ASSESSMENT CAN DETERMINE THE ASSESSED INCOME AT AN AMOUNT LOWER TH AN RETURNED INCOME BY ALLOWING ALL THE DEDUCTIONS TO WHICH THE ASSESSEE IS LAWFULLY ENTITLED. 6. THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, ON MERITS, UNDISPUTED LY, THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS COMPARED TO PREVIOUS AY 2013-14 AND THE ALTERNATE CLAIM OF ASSE SSEE U/S 37(1) MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS FAIRLY COVERED BY ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 10 THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE IN AY 2013-14 (ITA NO. 572/JP/17 DATED 1.9.2017) WHEREIN THE COORDINATE BENCH HAS HELD AS UNDER:- 24. AS HELD BY THE HONBLE SUPREME COURT, IN CONSI DERING THE CASES OF MINING BUSINESS AS IN THE INSTANT CASE, THE NATURE OF THE LEASE, THE PURPOSE FOR WHICH EXPENDITURE IS MADE, ITS RELATION TO THE CARRYING ON OF THE BUSINESS IN A PROFITABLE MANNER SHOULD BE CONSI DERED. WHERE THE ASSESSEE HAS AN EXISTING RIGHT TO CARRY ON A BUSINE SS, ANY EXPENDITURE MADE BY IT DURING THE COURSE OF BUSINESS FOR THE PU RPOSE OF REMOVAL OF ANY RESTRICTION OR OBSTRUCTION OR DISABILITY WOULD BE ON REVENUE ACCOUNT, PROVIDED THE EXPENDITURE DOES NOT ACQUIRE ANY CAPIT AL ASSET. PAYMENTS MADE FOR REMOVAL OF RESTRICTION, OBSTRUCTION OR DIS ABILITY MAY RESULT IN ACQUIRING BENEFITS TO THE BUSINESS, BUT THAT BY ITS ELF WOULD NOT ACQUIRE ANY CAPITAL ASSET. 25. IN THE INSTANT CASE, DURING THE RELEVANT PREVIO US YEAR, THE ASSESSEE COMPANY PAID AN AMOUNT OF RS. 35,00,000, TO MR. RAN GA, S/O MR. PANCHIYA MEENA. IT IS THE CONTENTION OF THE AR THAT THE AMOUNT HAS BEEN PAID AS COMPENSATION TO THE LAND OWNER. THE A REA FOR WHICH COMPENSATION WAS PAID FORMS PART OF THE AREA WHICH HAS ALREADY BEEN LEASED OUT BY THE GOVERNMENT OF RAJASTHAN TO THE AS SESSEE COMPANY AND FOR WHICH THE ASSESSEE COMPANY HAD THE RIGHT TO CARRY OUT MINING OPERATIONS. IT WAS CONTENDED THAT AS THE EXISTENCE OF THE LANDOWNER ON SUCH LAND HAD THE POTENTIAL OF OBSTRUCTING THE MINI NG OPERATIONS, THE ASSESSEE COMPANY PAID THE COMPENSATION WITH A VIEW TO CARRY ON ITS BUSINESS ACTIVITIES SMOOTHLY AND WITHOUT ANY OPERAT IONAL HINDRANCES. IT ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 11 WAS FURTHER SUBMITTED THAT ON PAYMENT OF COMPENSATI ON, THE LANDOWNER SURRENDERED THE LAND TO THE GOVERNMENT OF RAJASTHAN AND THE LAND BECOMES EXCLUSIVE PROPERTY OF GOVERNMENT OF RAJASTH AN AND MUTATED IN THE NAME OF GOVERNMENT OF RAJASTHAN IN THE REVEN UE RECORDS. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE COMPANY DID NT ACQUIRE THE SAID PIECE OF LAND BY WAY OF ANY NEW ASSET AND THE AMOUNT WAS SPENT MERELY FOR THE PURPOSES OF REMOVING THE OBSTRUCTION TO FACILITATE THE MINING OPERATIONS. IN SUPPORT OF HIS CONTENTIONS, THE LD AR HAS SUBMITTED VARIOUS DOCUMENTS SUCH AS UNDERTAKING FOR SURRENDER OF LAND BY LAND OWNER, SURRENDER LETTER OR SAMARPAN PATRA E XECUTED BY THE LAND OWNER, CHAIN OF EVENTS DOCUMENTED BY TEHSILDAA R, LETTER WRITTEN BY LAND OWNER TO TEHSILDAAR SURRENDERING THE LAND, REPORT OF TEHSILDAAR FOR VERIFICATION OF FACTS AND EVIDENCE THAT THE LAN D SURRENDERED BY MR. RANGA WAS MUTATED IN THE NAME OF THE GOVERNMENT OF RAJASTHAN IN THE REVENUE RECORDS. IT HAS BEEN CONTENDED THAT ALL THE SE DOCUMENTS WERE SUBMITTED BEFORE THE LD CIT(A). IN OUR VIEW, THESE ARE RELEVANT DOCUMENTS WHICH HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE COMPANY TO DETERMINE THE EXACT NATURE OF TRANSACTIO N AND AMOUNT PAID BY THE ASSESSEE COMPANY TO THE LAND OWNER. THE LD CIT(A) HAS RECORDED A FINDING THAT DURING THE PREVIOUS YEAR RE LEVANT TO A.Y 2013- 14, THE APPELLANT PAID RS. 35 LAC TO SHRI RANGA WHO WAS HAVING IN HIS POSSESSION, A PIECE OF LAND (KHASRA NO. 53, ARAJI N O. 157, RAKBA 3 BIGHA & 8 BISWA), AS THIS PIECE OF LAND WAS PART OF THE TOTAL AREA ALLOTTED BY THE GOVERNMENT TO THE APPELLANT FOR MIN ING THE SOAP STONE. THE APPELLANT HAD IN THE PAST ALSO MADE SUCH PAYMEN TS TO OTHER PERSONS FOR GETTING POSSESSION OF THE LAND IN ORDER TO DO THE MINING IN THE AREA. THE SAID FINDING OF THE LD CIT(A) REMAIN UNCONTROVERTED ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 12 BEFORE US. GIVEN THAT THE PIECE OF LAND FALLS WITH IN THE MINING AREA IN RESPECT OF WHICH ASSESSEE HAS AN EXISTING RIGHT TO CARRY ON ITS MINING OPERATIONS AND THE FACT THAT ASSESSEE WISHES TO CAR RY ON THE MINING AREA IN THAT AREA, THE ASSESSEE WAS REQUIRED TO PAY COMPENSATION TO THE LAND OWNER SO THAT THE LATTER DOESNT OBSTRUCT OR CHALLENGE THE CARRYING OF THE MINING ACTIVITY UNDERNEATH THE SURF ACE OF LAND WHICH BELONGS TO HIM. THE PAYMENT IS FOR THE PURPOSES OF REMOVING THE DISABILITY OR OBSTRUCTION AND TO FACILITATE THE CAR RYING ON ITS BUSINESS. NO FRESH RIGHTS HAVE BEEN ACQUIRED BY THE ASSESSEE BY VIRTUE OF PAYING THE SAID COMPENSATION. THE ASSESSEE WAS ALREADY HAVING A RIGHT TO CARRY ON THE MINING OPERATIONS. THE FACT THAT LAND STAND MUTATED IN THE NAME OF THE GOVERNMENT OF RAJASTHAN POST SURRENDER BY SHRI RANGA ALSO SHOWS THAT THE LAND OR THE SURFACE RIGHTS THER EIN HAVE NOT BEING ACQUIRED BY THE ASSESSEE. IN LIGHT OF ABOVE DISCU SSIONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF BIKANER GYPSUM (SUPRA), THE ASSESSEE DESERVE TO SUCCEED IN THE INSTANT CASE. THE AO IS THEREFORE DIRECTED TO ALLO W THE CLAIM OF DEDUCTION OF RS 35,00,000 U/S 37(1) OF THE ACT. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 8. REGARDING THE QUANTUM OF CLAIM WHICH CAN BE ALL OWED UNDER SECTION 37(1) OF THE ACT, IT IS AGAIN AN UNDISPUTED FACT THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS 60 LACS DURING TH E PREVIOUS YEAR RELEVANT TO IMPUNGED ASSESSMENT YEAR AND A CLAIM U/ S 37(1) WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE FA CT OF INCURRENCE OF THE EXPENDITURE AND THE FACT THAT THE SAID EXPENDIT URE HAS BEEN INCURRED FOR THE PURPOSES OF THE BUSINESS HAS NOT B EEN DISPUTED. IN THE ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 13 RETURN OF INCOME, THE ASSESSEE HAS CLAIMED DEPRECIA TION OF RS 52.98 LACS HOWEVER, THE SAID DEPRECIATION RELATES TO EXPE NDITURE INCURRED IN EARLIER YEARS AND WHICH HAS BEEN CAPITALIZED AS WEL L AS EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION ON WHI CH DEPRECIATION HAS BEEN CLAIMED. IN THE EARLIER YEAR I.E, AY 2013-14, THE WHOLE OF THE EXPENDITURE HAS BEEN ALLOWED AS REVENUE EXPENDITURE AND THEREFORE, IF WE WERE TO APPROVE THE APPROACH OF THE REVENUE, IT WILL CREATE AN INCONSISTENT POSITION AS FAR AS THIS CLAIM OF EXPEN DITURE IS CONCERNED. ONCE A CLAIM IS HELD TO BE LEGALLY ALLOWED, THERE I S THUS NO BASIS TO RESTRICT THE QUANTUM OF SUCH CLAIM ONCE OTHER CONDI TIONS FOR CLAIMING SUCH EXPENDITURE HAS BEEN DULY SATISFIED. THEREFOR E, CONSISTENT WITH THE POSITION IN THE EARLIER YEAR AND FOLLOWING THE DECISION OF THE COORDINATE BENCH REFERRED SUPRA, THE WHOLE OF THE E XPENDITURE OF RS 60,00,000 INCURRED DURING THE YEAR IS ALLOWED AS REVENUE EXPENDITURE U/S 37(1) OF THE ACT. IN THE RESULT, G ROUND OF ASSESSEES APPEAL IS ALLOWED AND THE GROUND OF REVENUES APPEA L IS DISMISSED. 9. REGARDING GROUND NO. 2 AND 3 OF THE REVENUES AP PEAL, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS. 13,70,733/- TOWARDS CONTRIBUTION TO PF AND ESI. THE LD. AR SUBM ITTED THAT THE ASSESSEE COMPANY HAS DEPOSITED EMPLOYEES CONTRIBUT ION TO PF AND ESI AMOUNTING TO RS. 13,70,733/- WITH DELAY OF FEW DAYS FROM THE DUE DATES, HOWEVER THE SAME WERE DEPOSITED BEFORE THE D UE DATE OF FILING OF THE RETURN OF INCOME U/S 139(1) OF THE ACT WHICH IS EVIDENT FROM THE ORDER OF THE ASSESSING OFFICER. IT WAS FURTHER SUBM ITTED THAT THE MATTER IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISIONS OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. STA TE BANK OF BIKANER & ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 14 JAIPUR 43 TAXMAN.COM 411 AND CIT VS. JAIPUR VIDYUT VITRAN NIGAM LTD. 49 TAXMAN.COM 540. 10. WE FIND THAT THE LD CIT(A) HAS RELIED UPON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT REFERRED SUPRA IN DELE TING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORD INGLY, WE CONFIRM THE ORDER OF THE LD CIT(A) AND THE GROUND OF REVENU ES APPEAL IS HEREBY DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/12/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/12/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S ASSOCIATED SOAPSTONE DISTRIBUTIN G CO. PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT/DCIT, CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. ITA NO. 489 & 640/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR ITA NO. 489 & 640/JP/2018 M/S ASSOCIATED SOAPSTONE DISTRIBUTING CO. PVT. LTD. VS. ACIT 15